* Steel strip prices up, supporting futures
* Factory activity in July sank for the most in 15 months
* Vale seen sticking to output expansion plan (Updates close prices)
SHANGHAI, July 24 (Reuters) - Chinese rebar futures recovered from early losses on Friday and headed for their first weekly rise in eight, despite worries over softening demand in the world's top producer China.
The most traded January rebar contract on the Shanghai Futures Exchange SRBcv1 inched up 0.3 percent to 2,044 yuan ($329.22) a tonne by the close after two days of decline.
Steel strip prices in the country's top-producing region of Tangshan rose 30 yuan to 1,990 yuan a tonne, and billet prices rose to 1,780 yuan, traders said. Strip and billet are key barometers for the wider market.
"The real demand remains weak, bringing down mills' running rates in Tangshan to the lowest since 2009. Prices are likely to be volatile at lower levels for a while," said Li Wenjing, an analyst with Industrial Futures in Shanghai.
"The market has lost confidence after going downward for such a long time."
China's factory sector contracted by the most in 15 months in July as shrinking orders depressed output, a preliminary private survey showed on Friday, a worse-than-expected result that should reinforce bets the struggling Chinese economy will get more stimulus. ID:nL3N1032YR
Rebar futures are down by a quarter so far this year, forcing more mills to step up production cuts and reduce restocking of the raw material iron ore.
Iron ore futures on the Dalian Commodity Exchange DCIOcv1 fell 0.4 percent to close at 348.5 yuan a tonne. It posted the fourth weekly drop as increasing supply from top global miners and sluggish demand in major consumer China hurt the commodity.
Brazilian mining company Vale SA VALE5.SA said on Thursday it produced 85.3 million tonnes of iron ore in the second quarter, a record for the quarter and its second-highest ever quarterly output. It is on track to meet its 2015 iron ore production guidance of 340 million tonnes. ID:nL1N10314K
Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI extended losses on Thursday, down 0.2 percent to $50.60 a tonne, according to the Steel Index.
Rebar and iron ore prices at 0700 GMT
Contract
Last
Change Pct Change
SHFE REBAR JAN6
2044
+6.00
+0.29
DALIAN IRON ORE DCE DCIO JAN6
348.5
-1.50
-0.43
SGX IRON ORE FUTURES SEP
47.11
-0.06
-0.13
THE STEEL INDEX 62 PCT INDEX
50.6
-0.10
-0.20
METAL BULLETIN INDEX
51.72
-0.04
-0.08
Dalian iron ore and Shanghai rebar in yuan/tonne
Index in dollars/tonne, show close for the previous trading day
($1 = 6.2086 Chinese yuan)